Welcome to Economics 101 and price elasticity models and its effect on demand. Add a pay structure to a free web site and traffic to that site drops. Thus is the case with The New York Times website. Clearly, a pricing model to a formerly free website would have been strategized and measured. Without it, how could a subscription price be determined. The risks are measured, the loss of subs to the ad model against the gain from subscription pricing, and a price point that at most, led to a flat impact on the revenue projections. And according to the NYT, the actual results were anticipated. "An analyst also said today that the paywall may be working. 'Our framework suggests that even if The New York Times loses 20% of its web traffic, it will need to add about 107k subscribers to break even,' Citi analyst Leo Kulp said in a note to investors." Economic theory at work!
So what is left? Smart marketing. Building value of the product to the price point charged and satisfying the subscriber so that they remain loyal users. It is harder to find a new sub, easier to retain one. Keeping the website robust and its editorial invaluable are key. The rise of tablets and mobile devices and the demand for content should bring more subscribers to join up. Consumers want to make their iPads, Kindles, and Nooks as invaluable as possible and access to a NYT daily edition online can satisfy that demand.
Transitions from one technology to another can be difficult and in the short term, financially hurtful. But look at Netflix and see how they successfully moved from DVD toward streaming while its competitor, Blockbuster, was much slower to act. The same holds true for The New York Times. The long term gains should outweigh these short term struggles. The need to change to a digital pay model is necessary and can lead to a resurgence in subscriber growth.
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